Monday, August 10, 2015

Jobs, wages, taxes and benefits - mutually unsupportable?

A number of articles in recent days have led me to consider the unequal relationship between jobs - their availability and nature;  wages - minimum wage in particular;  and government benefits - both 'entitlement programs' and support payments.  It's an increasingly unstable situation.  Consider:

  1. Many jobs are being automated or are in danger of automation, as we've pointed out repeatedly in these pages over the past couple of years.
  2. One factor driving the switch to automated solutions to replace personnel is the demand for an increase in the legally-mandated minimum wage.  As a CBS report has just reminded us:  "The reality is that most business are not going to pay $15 dollars an hour and keep their doors open," says David Sutz, who owns four Burger Kings in New York. "It just won't happen. The economics don't work in this industry. There is a limit to what you're going to pay for a hamburger."  That applies all over the world - consider this report from India, for example.
  3. Wages aren't the only problem.  Many jobs are difficult to fill with people who are either qualified for the position, or who are willing to put in the hard work required for success.  I've lost count of the number of friends and associates who've complained to me that they simply can't find enough willing hard workers to fill all the positions they have available;  and of those they do hire, between a third and a half are gone (voluntarily or involuntarily) within three to six months due to lack of a work ethic or some other disqualifying factor.  They now hire only with extended probationary periods, to allow them to sort the wheat from the chaff before the cost of permanent benefits kicks in.  Again, this drives the increased adoption of automation to replace personnel.
  4. Many of those who should be working are receiving government benefits that make it uneconomical to work hard and increase one's income.  For example, the Illinois Policy Institute reports"For single-and two-parent households in Illinois, there is a significant welfare “cliff” where the household may become worse off financially as they work more hours or as their wages increase. That is because the available welfare benefits decline by a greater amount than the increase in earned income."  That's why many potentially suitable employees are deliberately making the decision not to work, and to rely on handouts instead.  They're financially better off that way.
  5. However, state-provided benefits are dependent on taxes.  If insufficient money comes in, they can't be paid - but if there are fewer workers earning income that can be taxed, then there's less money to pay to those depending on benefits to survive.  Fewer workers = more on benefits:  but lower tax income = less money available for benefits.  It's a vicious circle.

I don't think many government entities - national, state or local - have fully realized the interwoven complexity of this situation;  or, if they have, they've simply continued to borrow money to pay what they can't raise through taxes, thus punting the problem down the road for future generations to deal with.  That crisis is almost upon us on a national level, and in many states as well.

We either break this vicious circle, or let it become a whirlpool of financial malaise that will drag us all into it.  If we leave that choice up to our present generation of political leadership . . . hey, what's that sucking sound?



trailbee said...

Each time I read about this I stop to think and wonder what the British people felt right at that moment. It must have been an absolute disaster for a country that had always been so certain of her Naval sovereignty locally and around the world. This is nice outcome.

Paul, Dammit! said...

Just before I left Massachusetts last year, I remember reading that an unemployed single mom with 2 kids makes the cash equivalent of somewhere around $46,000 in MA.

46k. I didn't make 46k until 5 years after I got out of grad school, when I gave up being a biologist full time, out of need. No wonder there's no impetus to step back from the trough.

Of course, in my adult career, my current employer happily will take a kid with no GED, so long as he can read and can work, and pay him a lot more than that to mostly loaf around on a tugboat and occasionally throw lines and mop the deck, and give him full benefits. The only place we can recruit kids is in the South. Young men up north won't give up smoking weed for 50k a year and 2 weeks off every month.

STxAR said...

I knew of 2 men. They would get hired as mechanics or welders here in the Eagle Ford, and get laid off in 3 weeks. I thought how fickle the employers were, until I found out how worthless they were. I have no idea how they got fired so fast, but they couldn't keep a job. They all lived off their mom's social security. I just don't get it.

My self worth is pretty deeply tied to my productivity. If I laze around on a weekend, I feel like crap for wasting 2 days....

McChuck said...

This isn't necessarily by accident. Look up Cloward-Pivens Strategy. Is it still a conspiracy if they publish it in book form?

perlhaqr said...

Well, and what I wonder is, if automation keeps increasing as it has, what are we going to do with all the people who just can't compete? I mean, even if the minimum wage were reset to the actual level of "zero", some portion of the populace just won't have enough skills to generate a liveable income.

Anonymous said...

You don't pay healthcare, Social security or IRA/pension contributions to an automated worker. It doesn't take vacation, sick days or personal or maternity leave with pay.
It doesn't care what shift it works.
It never misses work because of sick kid or parent, it's never late because it was hung over.
It never insults or harasses other employees, vendors or customers.

The total cost of a bad employee really starts to sky rocket compared to a machine.


Bob said...

There is something like 7 Billion living humans on planet Earth today.

The coming die-off is going to be massive and incomprehensible to most people.

But it's going to happen.

tens of Millions will die of starvation. millions more in the food riots, and governments around the world will kill hundreds of millions more.

It will not end until more than 5 Billion are gone.

I certainly do not want to be around to witness it, and at age 77, I just may luck out and die before this all happens.

It's going to happen. Like they say, there are no other possibilities.

freddie_mac said...

"What are we going to do with the people who can't compete?"

Change "can't" to "won't" and we'll have a clearer picture. I'd dearly love for welfare to come with an expiration date; people would be much more willing to work if no more money was coming in the door. But, politicians these days refuse to make hard choices and hold people accountable. Remember the miniscule welfare reforms from the Clinton era (which Obama has finished eliminating); people were amazed at how much the welfare rolls dropped, yet there wasn't a corresponding increase in homelessness ... People respond to incentives.

MadMcAl said...

What you need is a group of politicians in power who have the moral strength to simply overturn all these wellfare nightmares, and accept the personal consequences.

Not that wellfare as such is something bad. But it has to be balanced and concentrated on those who actually need it.
The infirm (either physically or mentally), the old and the very young.
The rest get enough to survive, and not more.
No car, no cable tv, no broadband, not enough for alcohol or cigarettes.
If the recipient abuses it, s/he has to be set on personalized food stamps (or maybe a personalized govermental debit card that is good for only a few things).
The ones who can't work should be protected.
The ones who try to find work should be assisted in that, by for example moving assistance to a place where there is work for them.
The ones who could but don't want to, let them sink.

Keith Glass said...

Just. . . .wow.

I'm comparing the indexed cost of living. It was 1996, a bachelors degree, 6 years in the Air Force (as a Flying Officer: B-52 EW Officer/Navigator) and 7 more years experience before I made, adjusted, what a single mom in Taxachusetts makes now.

We are SERIOUSLY screwed, blued, and tattoed. . .

perlhaqr said...

Well, "won't" is certainly a problem, but I really am talking about "can't". If the legal minimum wage laws were all dropped, leaving the "minimum wage" as the natural economic value of "zero" (Some people's labor has less value than others. Definitionally, this will mean that some people's labor has less value than any arbitrarily determined "minimum wage". Some people's labor is valueless.) then some people will only have the skills to perform tasks of such low economic value that they simply cannot survive on what they can earn. Especially as more and more jobs are replaced by automation, and certainly when combined with the effects of Federal Reserve engineered inflation.

And unless we're going to let people like that just starve in the streets, I'm not sure what to do with them. They are unlikely to just quietly suicide. I would rather not face riots by the dispossessed.